Insurer implications of landmark sexual abuse case ruling

How many claims could be reopened?

Insurer implications of landmark sexual abuse case ruling

Legal Insights

By Daniel Wood

A recent Tasmanian Supreme Court decision is a positive step for sexual abuse survivors but could contribute to increasing the number and cost of sexual abuse claims faced by Australia’s insurers.

Insurance specialists at international law firm Clyde & Co regard the ruling as a landmark.

The decision in Steen v Trustees of the Diocese of Tasmania set aside the plaintiff’s prior settlement in 1994 of $34,000. The new ruling has awarded the survivor the much larger sum of $2.4 million in damages.

“Not only has this case effectively confirmed that earlier settlements will not, in particular circumstances, bar an applicant from reopening their claim,” said Luke O’Kane (pictured immediately below), a Clyde & Co partner, “it demonstrates that the survivors of historical abuse may also be awarded significant damages.”

O’Kane leads a team of seven lawyers who act for insurers in a range of insurance-related cases, including historical sexual abuse cases.

Potential for “significant damages”

Insurance Business asked roughly how many historic sexual abuse cases could be affected?

“There is no real practical approach to estimating the number of settled cases that may be impacted,” said O’Kane. “The legislative framework across the respective Australian states and territories provide that each application to set aside a prior agreement be considered in the context of its specific circumstances and merits.”

O’Kane said these rulings are “a relatively new trend.” If the trend continues, he said “a real consideration for insurers will be the potential significant damages awarded.”

Insurers should watch their exposures

Isabella He (pictured immediately below) said the setting aside of prior deeds is “yet to be fully explored by the courts.” She works with O’Kane as an associate in Clyde & Co’s catastrophic injury and large loss team.

“Parties ought not to simply assume that an earlier settlement of a claim will prima facie preclude a survivor from reopening their cause of action and that a prior deed can be used as a complete defence,” she said.

Isabella He said institutions and insurers should be “mindful of the risks of past settlements” in relation to coverage and their exposure to “substantial quantum assessments.”

More details on Tasmania’s ruling

The Clyde & Co associate said an important part of the Tasmanian ruling concerned whether the expiration of the limitation period for an abuse case “had a disproportionate influence on the survivor’s decision to settle his claim for a particular amount and whether such expiry effectively forced the survivor to accept whatever offer was proposed to them at the time of entering into the Deed.”

Other key considerations, she said, included:

  • the plaintiff’s claim being statute barred at the time of the settlement agreement
  • the plaintiff’s reporting of the abuse by the perpetrator resulted in the perpetrator’s promotion within the defendant’s organisation
  • members of the defendant’s organisation were aware of the perpetrator’s prior behaviour, which involved sexual misconduct against another child
  • the perpetrator had admitted to the (then) Bishop Administrator of the Diocese that he had sexually propositioned another boy aged 14 years
  • despite knowledge of the perpetrator’s “propensity for sexual abuse of children”, the defendant denied liability during settlement negotiations.

“Oppressive” denial of liability by Diocese of Tasmania

“Primarily, the Court considered that the defendant’s denial of liability in 1994, which had no factual or legal merit, had been oppressive,” said Isabella He. “In addition, the defendant’s decision to require the settlement money to be paid by the perpetrator only, and make no contribution, was considered an oppressive approach.”

The court, she said, also referred to “the disparity in bargaining position between the plaintiff and the defendant” partly due to the plaintiff’s young age and poor psychological health at the time of negotiations.

Other states and historic abuse cases

Isabella He said a similar test for setting aside a deed in claims arising from sexual abuse already exists in NSW.  According to a recent Clyde & Co report, under the Civil Liability Act 2002 (CLA), NSW goes further than Tasmania.

CLA, said the report, “imposes no restraint on the courts’ discretion in relation to factors it may consider,” including the amount paid to survivors.

In Western Australia, the Court can also set aside previous settlement agreements.

She referred to a 2020 case in WA: WPM v Trustees of the Christian Brothers, where the Court set aside a prior deed partly because, at the time of the earlier settlement, WPM was “statute barred” from commencing a claim arising from sexual and physical abuse.

In a Victorian sexual abuse case: WCB v Roman Catholic Trusts Corporation for the Diocese of Sale, the court considered that the original settlement was “a significant discount on the merits of WCB’s cause of action had it not been statute barred,” said Isabella He.

However, in a Queensland case, the Court of Appeal upheld a judge’s 2002 decision, said the Clyde & Co associate, because the expiry of the limitation period “did not materially affect” the decision to settle or the settlement amount.

“It will be interesting to see what other considerations the court will weigh in determining whether it is just and reasonable to set aside a prior settlement agreement,” she said.

Are you an insurance industry stakeholder involved in the defence or prosecution of cases of sexual abuse? How do you see this ruling in Tasmania? Please tell us below

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